The long and winding road traveled by Time Warner and AT&T is at an important turn this week as CEOs Jeff Bewkes and Randall Stephenson prepare to testify in the government’s lawsuit seeking to block their merger.
Bewkes will be up first, possibly before the end of this afternoon but more likely Wednesday, according to those watching the daily action in Washington. (The trial is not being streamed or broadcast.) It will reportedly be the first time Bewkes, 65, has testified in an antitrust trial, but that would be just one of many firsts for the landmark case. It is the first major media antitrust showdown since the Department of Justice quest to break up Microsoft in the late-1990s, and the first lawsuit opposing a vertical merger to go to trial since the 1970s. Many media companies’ strategic plans and tens of billions have been bottlenecked pending the case’s outcome, and megadeals like Disney’s purchase of most of 21st Century Fox could also be affected by the ruling.
The CEOs will be asked to justify their proposed $85 billion deal, which was first announced in October 2016, which feels increasingly like ancient history. U.S. District Court Judge Richard J. Leon, who will rule on the suit without a jury, has ruled that one key political dimension cannot be part of the companies’ defense in the case, which began with opening arguments on March 22. Stephenson, among many others, has wondered if the 11th-hour lawsuit by Makan Delrahim, President Donald Trump’s appointee to head the DOJ’s antitrust division, is driven by Trump’s well-documented disdain for CNN, a key asset in the merger.
Testimony by the CEOs in open federal antitrust court is a fairly rare thing, so the appearances by Bewkes and Stephenson should offer a shot of energy to the occasionally soporific proceedings. Much of the testimony in the first four weeks of the trial has focused on the question of whether a combined AT&T and Time Warner would exert an unfair amount of leverage over rival distributors and programmers. The government insists that it would, and that the company could remove its own programming if its terms are not met by distributors, suffering short-term economic pain in pursuit of longer-term conversions to its DirecTV and DirecTV now services. The companies have rejected that notion, insisting that their true competitors in 2018 include deep-pocketed tech giants like Google, Amazon, Netflix and Facebook. Whatever advantages the merged company may gain in the traditional marketplace (and even long before getting approval for the deal, DirecTV Now started marketing $5-a-month HBO) are far outweighed by the radically changed TV landscape, they argue.
Leon initially estimated the trial would last six to eight weeks, adhering to a Monday-to-Thursday schedule. At its current pace, plus factoring in the Memorial Day holiday and the week or so Leon will need to write his opinion, stakeholders have already circled June 21 on the calendar. That’s the date Time Warner and AT&T have set as the deadline for completing the deal.